Key facts about Canada’s competitiveness for foreign direct investment

September 2020

As Canada’s economic activity picked up over the summer months, improvements have been seen in its exports and imports as well in employment.

To help businesses and support its economy during the COVID-19 crisis, Canada’s COVID-19 Economic Response Plan was put in place for businesses. For details on different programs for individuals and businesses, see https://www.canada.ca/en/department-finance/economic-response-plan.html. 

This product presents the most up-to-date information. This edition includes data as of September 10th, 2020.

Highlights

• In July 2020, the new Canada-United States-Mexico Agreement (CUSMA) entered into force, preserving NAFTA’s virtually tariff free market access for Canadian exports in the U.S. and Mexico.
• The Canadian economy is resilient. After an expected contraction in 2020, it is anticipated to rebound and grow at 5.5% in 2021, a higher rate than the earlier forecast of 4.2% in spring 2020.
• Contributing to Canada’s resilient economy is its strong fiscal position going into the COVID-19 pandemic; it enjoyed the lowest net debt-to-GDP ratio in the G7 for the last 15 years. Canada’s strong fiscal position allowed it to respond swiftly and substantially to support those affected by the pandemic, the highest in the G7.
• After losing 3 million jobs in March and April 2020 due to COVID-19, Canada regained almost two-thirds of these jobs by the end of August 2020.
• Ottawa, Toronto, Montreal, Calgary and Vancouver have top tech talent and offer the lowest cost among 50 North American cities.

Canada is open for business and welcoming to foreign investment

• For 2020-2024, Canada is ranked as the best country in the G20 for doing business.
  Economist Intelligence Unit (EIU), August 2020
• Canada is the easiest place to start a business in the G20.
  World Bank, Doing Business 2020, October 2019
• Canada’s welcoming and robust business environment puts it first among OECD countries for its attractiveness for entrepreneurs.
  OECD Indicators of Talent Attractiveness, May 2019
• Foreign investors choose Canada to invest; Canada had the second largest Foreign Direct Investment stock-to-Gross Domestic Product (GDP) ratio among G20 countries over the period of 2015-2019.
  United Nations Conference on Trade and Development (UNCTAD), 2020

Fiscal soundness and resilient economy

• COVID-19 has radically changed the growth outlook all around the world. All G-7 countries are forecasted to experience recessions in 2020. Canada’s economy is anticipated to contract by 6.8%.  It is expected however to rebound and grow at 5.5% in 2021, a higher rate than the earlier IMF forecast of 4.2% in spring 2020 after COVID-19 hit.
  Finance Canada, 2020 Economic and Fiscal Snapshot; IMF, World Economic Outlook, April 2020
• With a current ratio of about 26%, Canada has enjoyed the lowest net debt-to-GDP ratio in the G7 for the last 15 years.
  International Monetary Fund (IMF), Fiscal Monitor, April 2020
• Canada’s strong fiscal position going into the COVID-19 pandemic has enabled it to provide significant support to individuals and businesses affected by the pandemic. In proportion of GDP, Canada’s support is the highest in the G7.
  Finance Canada, 2020 Economic and Fiscal Snapshot
• Following the loss of 3 million jobs in March and April 2020 due to COVID-19, almost two-thirds of these jobs have since been recovered to the end of August with over half in full-time positions.
  Statistics Canada, September 2020  
• Canada continues to top the G20 with Germany and Australia for its fiscal soundness and retained its triple A credit rating even with all the support for the economy to cope with the pandemic.
  S&P Global, July 2020

Low cost, low tax environment

• At 26.5% in 2020, Canada's combined federal-provincial statutory corporate income tax rate is one of the lowest in the G7.
  OECD Tax Database, April 2020 
• On top of having no tariff on imports of inputs and machinery for manufacturing, Canada offers full tax deduction in the first year of investments for the entire cost of machinery and equipment used for the manufacturing of goods and of some clean energy equipment.
  Government of Canada
• Canada’s Accelerated Investment Incentive (AII) enables businesses to recover the initial cost of their capital investment quickly, thus reducing their risk when investing.
  Government of Canada
• Since 2000, Canada has reduced taxation on new business investment from 44.1 % in 2000 to now 13.7%. It is the lowest tax treatment in the G7 for new business investment, and below the OECD average. It is significantly lower than in the U.S. (18.4%). It is even more advantageous in the sectors of manufacturing & processing (3.1% in Canada vs. 19.5% in the U.S.) and services (17.2% in Canada vs. 24.5% in the U.S.).
  Finance Canada

Highly educated and competitive workforce

• Canada has the most educated talent pool in the OECD, with more than half of its population aged 25 to 64 having a tertiary level education. |
  OECD, Education at a Glance, September 2020
• Canadians are linguistically diverse, with 1 in 5 Canadians speaking one of over 200 languages in addition to either English or French.
  Statistics Canada, Census 2016

Gateway to North America and the World

• Canada is the only G7 country with a trade agreement with all the other G7 countries. Furthermore, Canada has 14 active free trade agreements covering 51 countries, connecting businesses to 1.5 billion consumers and two thirds of the world’s GDP.
  Global Affairs Canada, January 2020
• Businesses in Canada now enjoy preferential access to a global market with a combined GDP of US$53 trillion, representing almost two-thirds of the world’s output of goods and services, and home to nearly 1.5 billion consumers.
  IMF, World Economic Outlook, October 2019
• Out of Canada’s 20 largest cities, 16 are within a 90-minute drive of the Canada U.S. border, anchoring cross-border Canada-U.S. trade valued at over US$1.7 billion each day.
  Statistics Canada and U.S. Bureau of Economic Analysis, 2019
• As a CUSMA member, Canada offers foreign investors preferential access to a market of over US$23 trillion in GDP with nearly 490 million consumers, and virtually tariff-free market access to the U.S. and Mexico.
  IMF, World Economic Outlook, October 2019

Environment conducive to leading-edge innovation

• Canada leads the G20 in R&D spending in higher education as a share of GDP.
  OECD Main Science and Technology Indicators, August 2020
• Canada offers one of the most generous R&D tax incentives in the G7.
  OECD R&D Tax Incentive Database, June 2020
• Ottawa, Toronto, Montreal, Vancouver, and Calgary have high tech talent and yet the lowest tech cost among 50 North American cities. Furthermore, Toronto ranked 4^th overall as tech talent market for its dynamism, talent quality, and cost in 2019.
  CBRE Group Inc., July 2020  

One of the world’s most stable financial sectors

• Canada’s banking system ranks second in the G20 and sixth among 141 countries; it is one of the soundest in the world.
  World Economic Forum, Global Competitiveness Index 2019-2020
• Six of the world’s 50 safest banks are in Canada.
  Global Finance Magazine, 2019

Great place to live and prosper

• Canadians enjoy one of the highest standards of living in the G20.
  IMF, World Economic Outlook, October 2019
• Canada ranks among the top five OECD countries for its living conditions and quality of life.
  OECD, Better Life Index 2017
• Canada is the most democratic country in the G20.
  EIU, Democracy Index 2019